Patents reduce inequality.

One way in which patented innovation reduces economic inequality is by helping those with less gain more over their lifetimes. The inventors and inventions of the previous Part hint at these paths to prosperity. Frank Ball's patents served as the basis for the Ball Engine Co., the company he co-founded with his partner. 169Before he was known as "Jack Fishman," the inventor of naloxone, Jacob Fiszman fled Nazi occupation in Poland with his parents. 170One of the inventors on the Oracle patent, who immigrated to the United States for schooling, has gone on to become a Silicon Valley executive. 171

But patents can also help those with much gain even more. Larry Ellison was one of the richest people in the world by the time he was issued the '944 [*34] patent. 172His company has ranked among the top fifty patentees 173and has used its patents to sue other large companies. 174Is patented innovation actually helping to lift incomes at the bottom relative to the top, or making the rich, and the dominant firms they work for, richer? Both, the empirical research suggests.

Philippe Aghion and his coauthors have analyzed the relationship between changes in patenting and changes in income inequality from 1980 to 2015. 175When the researchers looked at entities that had increased their patenting intensity in general, they did not find an increase in economic mobility. In fact, they found the opposite: increases in the intensity of patenting were correlated with increases in "top income inequality." 176The accumulation of patents made the very rich (top 1%) richer, consistent with what we might call the "Larry Ellison effect." 177

However, when the analysis was limited to patenting by first-time patentees (or "new entrants"), the opposite was true: first-time patenting was positively associated with both increasing economic mobility and decreasing general inequality. 178Collectively, these facts implicate a Rawlsian tradeoff: the growth in patented innovation has made the rich richer but also the poor richer. California illustrates how both can be true. There, the very rich owe much to innovation: 29% of the increase in the top 1%'s income share over the past decades is due to innovation. 179But, economic mobility is also high - "much higher than those in the least innovative state" - thanks, at least in part, to patented innovation. 180 [*35]

But are patents doing the work of innovation-driven economic empowerment, or are just along for the ride? It is important to acknowledge that the question is irrelevant for the many innovative firms that do not patent. In addition, the answer is likely to be unique for each firm, based on the relative importance of the patent to non-patent assets and comparative advantages. However, relevant research, which has tracked startups that do and do not succeed on their patent applications, 181finds that getting a first patent acts as a catalyst on the path to success. 182Companies that win the patent "lottery" "create more jobs, enjoy faster sales growth, and are more innovative," 183though these gains may be at the expense of other startups. Just as startups appear to be more responsive to gaining patents, they also seem to be more sensitive to losing them. Galasso and Schankerman have found, in their study of patent invalidations, that the loss of patent rights by small firms significantly increases the likelihood of an exit from patenting. 184